Many people have different expectations when it comes to real estate investing. Some people think that it’s simple enough that you can make loads of money just flipping one property, while others expect it to be hard to get into. In this article, let’s debunk some common myths and misconceptions about real estate investing and share what it’s really like.
Expectation #1: Real Estate is Passive
The usual expectation when it comes to real estate is that it’s a passive investment, but in reality, it’s not exactly. To get your real estate income to the point where it becomes a passive investment, it requires a lot of work upfront.
It’s quite easy to look at someone’s result, not knowing that that is just the tip of the iceberg, which pales in comparison to all the work and effort he went in to get to that success. For others, it may take 6 – 8 months to find the right property, another month fixing it up, and another few weeks to find a tenant to move in.
But once you’ve set it up, you can basically just sit back, relax, and enjoy the fruits of your labor. But remember, it’s not passive throughout, you need to put in the work.
Expectation #2: You need a lot of money to start
While real estate certainly isn’t an “online investing for dummies” kind of thing, the reality is often to invest in real estate; you’re going to have to spend between 10% and 25% as a downpayment on the purchase price. This amount could be a lot depending on your area, and also your definition of what a lot is.
Buying a property in Los Angeles is going to be a lot different than buying a property in Kentucky, and a difference of putting 10% down could be $100,000 or $10,000. Some people might also have advantages when it comes to putting low down payment amounts.
Expectation #3: You Do Your Own Repairs
This next expectation in real estate investing is the notion that you need to do almost all of the repairs for yourself, or you need to be somewhat of your own handyman. The reality is, there are a lot of successful real estate investors who are the least handy person out there and can’t do repair stuff besides changing a light bulb.
While there are landlords who do all the work themselves to save on labor, it’s absolutely not a requirement. Depending on how much your time is worth, it could actually be cheaper to pay someone else to do these repairs for you instead of doing it yourself.
It’s also worth noting that all of these repair costs are a tax writeoff against your rental income. But if you do the work yourself, you cannot deduct the cost of your own labor. Often times, it’s just easier to hire professionals to get repairs right the first time.
Expectation #4: It’s like TV Shows
Real estate investing is often compared to or likened to what it is on TV, but then, in reality, it is nothing like it’s shown on television. Most of the reality TV shows you see are loosely scripted to manufacture a problem or drama and make it interesting to watch all the way through.
Just about every single real estate investing tv show out there starts with having a goal. Then some unexpected problems will arise where they have to find a solution for it, and then at the very end, there’s a happy resolution.
The thing is, when it comes to actually invest in real estate, the real problems you get are not that exciting. There are a lot more minor and they’re more so just an inconvenience. The truth is most of it is pretty predictable and boring.
But don’t get the wrong idea, real estate investing is fun in the sense that there’s a lot of creativity involved in seeing a property come to life from scratch.
Expectation #5: You’ll Make A Ton Of Money
The final expectation when it comes to real estate investing is that you’ll make loads of cash. The reality is, just one property won’t make you filthy rich. The real magic comes when you start to scale upwards.
When you start getting more than 5 properties that make you $1000 each per month, that’s where you’ll feel the income, and it will slowly add up. A lot of landlords initially start small while they still have a job, slowly start making some money until they’re real estate income matches or surpasses their day job income.
Similar to business, stocks, or other streams of income, it’s impossible to have success in real estate overnight. Behind each success comes a lot of hard work and determination to make it happen. So always approach real estate investing in a practical perspective and align your efforts with the realities of this industry.